INTRODUCTION

Export procedure is a system or method by which export trade transaction is completed. It

involves the study of different steps that are to be taken by the two parties, namely the
exporter and the importer. The export procedure is lengthy and time-consuming. It involves
a number of steps right from the time an export order is received and it is completed with
the realisation of export proceeds. In between, there are many formalities which are
required to be completed. The various steps can be classified into four stages:

EXPORT
PROCEDURE

STAGE 1 STAGE 2 STAGE 3 STAGE 4

Preliminary Pre-Shipment Shipment Post-Shipment
Stage Stage Stage Stage

STAGE 1:

Preliminary Stage

Registration Stage
The exporter is required -to register his organisation with a number of institutions and
authorities, which directly or indirectly
help him in the smooth conduct of export, trade. The
registration stage includes: -

a. Registration of the Organisation: - The form of organisation selected by the exporter

must. Be registered under the
appropriate Act of the country.
· A joint stock company under the Companies Act, 1956.;
· A partnership firm under the Indian Partnership Act, 1932.;
· A sale trader should seek permission from the local authorities, as required.
b. Opening-Bank Account: - The’ exporter should open a current account in the name of the
firm or company with a commercial
bank which is authorised by the Reserve Bank
of India (RBI) to deal in foreign exchange. Such bank also serves as a source of pre-
shipment and post-shipment finance for the
exporter.

c. Obtaining Importer-Exporter Code Number (lEC No.): - Prior to 1.1.1997, it was

obligatory for every exporter to obtain CNX
number from the RBI. However, since then, IEC number issued by the Director
General for Foreign Trade (DGFT) has replaced
the CNX number. The
application form for obtaining IEC number should be accompanied by fee of Rs.
1000.

d. Obtaining Permanent Account Number- (PAN): Export income is subject to a number

of exemptions and deductions under
different sections of the Income Tax Act. For claiming such exemptions and
deductions, the exporter should register his
organisation with the Income Tax Authorities and obtain the Permanent Account
Number (PAN).

e. Obtaining Sales Tax Number: - Exportable goods are exempted from sales tax,
provided, the ‘exporter or his firm is registered
with the Sales Tax Authorities. , For this purpose, the exporter is required to make an
application in the prescribed form to the’
Sales Tax Office (STO) in whose jurisdiction his {exporter’s) Office is situated.

f. Registration with, Export Promotion Council(EPC) :: It is obligatory for every exporter

to ,register with the
appropriate Export Promotion Council (EPC) and obtain the ‘Registration-cum-
Membership Certificate’ (RCMC). The benefits
provided in the current EXIM Policy are extended only to the registered exporters
having valid RCMC.

g. Registration with ECGC: - The exporter should also register with the Export Credit
and Guarantee Corporation of India (ECGC)
in order to secure overseas payments
against political and commercial risks. It also helps the exporters in obtaining the
financial assistance from commercial banks
and other financial institutions.

h. Registration with other Authorities: - The exporter should also register with various
other authorities, such as: -Federation of Indian Export Organisation (FIEO), Indian
Trade Promotion Organisation (ITPO), Chambers of Commerce (COC), Productivity
Councils, etc.
RECEIPT OF AN INDENT OR ORDER:
Every exporter has his organisation to look after exports. Such exporter has to get him
registered with various authorities such as RBI, EPC, Income Tax Authorities and JCCI & E. In
addition, he has to appoint agents or distributors for collection of orders from foreign
countries. Even direct approach to foreign buyers is also possible. These preliminaries are
necessary in order to export goods officially and conveniently to foreign countries. Actual
export procedure starts with the receipt of an indent or order from the importer or his
agent. Indent is an order for the supply of certain goods placed by the overseas buyer
(importer). The indent not only contains information about goods to be sent but also gives
complete instructions regarding packing, making, insuring, mode of payment and rate of
exchange. The exporter is supposed to acknowledge the indent received. Before actually
confirming the order he scrutinizes the order in all respects. If the terms and conditions laid
down in the indent are agreeable to him, then only the order is finally accepted for
execution.

OBTAINING LICENSE AND QUOTA:

After obtaining indent or order from the foreign buyer, the exporter has to secure necessary
permission (export license) from the government for exporting goods. This is necessary as
export of goods to overseas market is controlled by Import and Export Control Order, 1968.
Even the EXIM policy imposes certain restrictions on import and exports. If the commodity
for which order has been received happens to be a controlled commodity, the exporter has
to procure necessary export license. The licensing policy in respect of controlled
commodities is announced by the Ministry of Commerce, the problem of obtaining export
licensing does not arise on case of uncontrolled commodities. In order to obtain the valid
license, exporter has to apply to the export trade council authority. Application for the
export license has to be made in the form prescribed by the government. This application
for export license has to be accompanied by “Export License Application Fee” and the
relevant documents. The authorities then scrutinise the application and is satisfied, issue
export license. Along with export license, quota certificate is also issued in favour of the
exporter. Quota is the total quantity of goods that is permitted for exports. Quota is
determined o the basis of past performance of the exporter and his current needs.

STAGE 2
Pre-Shipment Stage
Pre-shipment stage consists of the following steps:
a. Approaching Foreign Buyers: - In order to secure an export order, a new exporter can make use of
one or more .of thetechniques, such as,’ advertising in international media, sales promotion, public
relation, personal selling, publicity andparticipation in trade fairs and exhibitions.

b. Inquiry and Offer: - An inquiry is a request from a prospective importer about description of
goods, their standard or grade,
size, weight or quantity, terms of
payments, etc. On getting an inquiry, the exporter must process it immediately by making an offer in
the form of a Performa
invoice.

c. Confirmation of Order: - Once the negotiations are completed and the terms and conditions are
finalised, the exporter sendsthree copies of Performa Invoice to the importer for the confirmation of
order. The importer signs these copies and sends backtwo copies to the exporter.

d. Opening Letter of Credit:-Since the purchaser is in the foreign country and since both parties are
unknown to each other, it is but natural for the exporters to demand a letter of credt. In many cases,
the importer himself sends the letter of credit along with his order. This document is issued by the
importers bank in favour of the exporter, assuring him the payment of export proceeds. Some
export houses treat the export order as confirmed only when the letter of credit is opened. In fact,
letter of credit is a document through which bank undertakes to pay to the exporter within the
prescribed time limit. Normally; exporter insists on opening of a letter of credit in the case of all
overseas purchases though it may not be necessary in the case of old customers or customers with
high reputation. Letter of credit gives more safety and security to the exporter as regards payment
for goods to be exported. The documentary credit or letter of credit is the most appropriate and
secured method of payment adopted to settle international transactions. On finalization of the
export contract, the importer opens a letter of credit in favour of the exporter, if agreed upon in the
contract.

e. Arrangement of Pre-shipment Finance: On securing the letter of credit, the exporter procures a
pre-shipment finance from his bank for procuring raw materials and other components, processing
and packing of goods and transfer of goods to the port of shipment.

f. Production or Procurement of Goods: - On securing the pre-shipment finance from the bank, the
exporter either arranges for
the production of the required goods. Or procures them from the domestic market as per the
specifications of the importer.

g. Packing and Marking: - Then the goods should be properly packed and JXl8.rkedwith necessary
details such as port ofshipment and destination, country of origin, gross and net weight, etc. If
required, assistance can be taken from the IndianInstitute of Packing (IIP).
h. Pre-shipment ‘Inspection’ - If the goods to be exported are subject to compulsory quality control
and pre-shipment inspection then the exporter should contact the Export Inspection Agency (EIA) for
obtaining an inspection certificate.

i.Central Excise Clearance: - The exporters are totally exempted from the payment of central excise
duty. However, the exemption should be* claimed in one of the following ways: -
· Export under Rebate.
· Export under bond.

j.Obtaining Insurance Cover: - The exporter must take appropriate policies in order to insure risks:
ECGE policy in order to over credit risks, Marine policy, if the price quotation agreed upon is CIF.
Appointment of C&F Agent: - Since exporting is a complex and time- consuming process, the
exporter should appoint a Clearing and Forwarding (C&F) agent for the smooth clearance of goods
from the customs and preparation and submission of various export documents.

Completing Foreign Exchange Formalities:

In this stage, the exporter has to undergo certain foreign exchange formalities

Stage 3

Shipment Stage

Export, cargo can be exported to the overseas buyer by sea, air or land. However, shipment by sea is
the most popular and
generally resorted to, as it is comparatively cheaper. Besides, the ship’s capacity is far greater than
other modes of
transportation. Nevertheless, transportation by air is utilized for export of expensive items like,
diamonds, gold, etc. The
shipment stage includes the following steps:

a. Reservation of Shipping Space: - Once the export contract is finalised, the I exporter reserves the
required space in the vessel
for shipment. On accepting the exporter’s request,
the shipping company issues a Shipping Order. The original copy of the shipping order as given to the
exporter and the duplicate instruction by the shipping company to the commanding officer of the
ship that the goods as per the details given should be received on board.

b. Arrangement of Internal Transportation up to the Port of Shipment :-The exporter makes

necessary arrangements for
transportation of goods to the port either by road or railways. On loading goods into the railway
wagon, the railway authorities
issue a ‘Railway Receipt’, which may be either ‘freight paid’ or ‘freight to pay’. It serves as a title to
the goods. The exporter
doses the railway receipt in favour of his agent to enable him to take delivery of the goods at
the port of shipment.

c. Preparation and Processing of Shipping Documents :- As the goods reaches the port of shipment,
the exporter should issue
detailed instructions to the C&F agent for the
shipment of cargo along with a complete set of the documents listed below:-
· Letter of Credit along with the export contract or export order.
· Commercial Invoice (2 copies)
· Packing List or Packing Note
· Certificate of Origin.
· GR Form (original and duplicate)
· ARE-I Form.
· Certificate of Inspection, where necessary (original
copy)
· Marine Insurance Policy.

d. Customs Clearance: - The cargo must be cleared from the Customs before it is loaded on the ship.
For this, the above
mentioned documents, along with five copies of shipping bill, are to be submitted to the Customs
Appraiser at the Customs
House. The Customs Appraiser
ensures that all the formalities relating to exchange control, quality control, pre-shipment inspection
and licensing have been
complied with by the exporter. After verification, all
documents, except the original GR, original copy of Shipping Bill and one copy of Commercial
Invoice, are returned to the C&F
agent.

e. Obtaining ‘Carting Order’ from the Port Trust Authorities: - The C&F agent, then, approaches the
Superintendent of the concerned Port Trust for obtaining the ‘Carting Order’ for moving the cargo
inside the dock. After obtaining the Carting Order, the cargo is physically moved into the port area
and
stored in the appropriate shed.

f. Customs Examination and Issue of ‘Let Export Order’: - The Customs Examiner at the port of
shipment physically examines the
goods and seals the packages in his presence.
The same can be arranged for at the factory or warehouse of the exporter by making an application
to the Assistant Collector of
Customs. The Customs Examiner, if satisfied, issues a formal permission I’ for the loading of cargo on
the ship in the form of a
‘Let Export Order’.
g. Obtaining ‘Let Ship Order’ from the Customs Preventive Officer: - ‘Let Export Order’ must be
supplemented by a ‘Let Ship
Order’ issued by the Customs Preventive Officer.
The C&F agent submits the duplicate copy of Shipping Bill, duly endorsed by the Customs
Examiner, to the Customs Preventive
Officer who endorses it with the ‘Let Ship Order’.

h. Obtaining Mate’s Receipt and Bill of Lading: - The goods are then loaded on board the ship for
which the Mate or the Captain
of the ship issues Mate’s Receipt to the Port Superintendent The Port Superintendent, on receipt of
port dues, hands over the
Mate’s Receipt to the C&F
Agent. The C&F Agent surrenders the Mate’s Receipt to the Shipping Company for obtaining the Bill
of Lading. The Shipping
Company issues two to three negotiable and two
to three non-negotiable copies of Bill of Lading.

Stage 4
Post-Shipment Stage
The post-shipment stage consists of the following steps: -

a. Submission of Documents by the C&F Agent to the Exporter: - On the completion of the shipping
procedure, the C&F agent submits the following documents to the exporter:-
· A copy of invoice duly attested by the Customs.
· Drawback copy of the shipping bill.
· Export promotion copy of the shipping bill.
· A full set of negotiable and non-negotiable copies of bill of lading.
· The original L/C, export order or contract.
· Duplicate copy of the ARE-I form.

b. Shipment Advice to Importer: - After the shipment of goods, the exporter intimates the importer
about the shipment of goodsgiving him details about the date of shipment, the name of the vessel,
the destination, etc. He should also send one copy of non-negotiable bill of lading to the importer.

c. Presentation of Documents to Bank for Negotiation: - Submission of relevant documents to the

bank and the process of getting the payment from the bank is called “Negotiation of the Documents”
and tile documents are called ‘Negotiable Set of Documents’. The set normally
contains: -
· Bill of Exchange, Sight Draft or Usance Draft.
· Full set of Bill of Lading or Airway Bill.
· Original Letter of Credit.
· Customs Invoice.
· Commercial Invoice including one copy duly certified by the Customs.
· Packing List.
· Foreign exchange declaration forms, GR/SOFTEX/PP forms in duplicate.
· Exchange control copy of the Shipping Bill.
· Certificate of Origin, GSP or APR Certificate, etc.
· Marine Insurance Policy, in duplicate.

d. Dispatch of Documents:- The bank -negotiates these documents to the importer’s bank in the manner
as specified in the L/C. Before negotiating documents, the exporter’s bank scrutinises them in order to
ensure that all formalities have been complied with and all documents are in order. The bank then sends
the Bank Certificate and attested copies of commercial invoice to the exporter.

e. Acceptance of the bill of exchange: - Bill of Exchange accompanied by the above documents is
known as the Documentary Bill of Exchange. It is of two types:
-Documents against Payment (Sight Drafts): - In case of sight draft, the drawer instructs the bank to
hand over the relevant documents to the importer only against payment.
-Documents against Acceptance (Usance Draft): - In case of usance draft, the drawer instructs the
bank to hand over the relevant documents to the importer against his ‘acceptance’ of the bill of
exchange.
-‘Letter of Indemnity: - The exporter can get immediate payment from his bank on the submission of
documents by signing a letter of indemnity. By signing the letter of indemnity the exporter
undertakes to indemnify the bank in the event of non-receipt of payment from the importer along
with accrued interests.
- Realisation of Export Proceeds :- On receiving the documentary bill of exchange, the importer
releases payment in case of sight draft or accepts the usance draft undertaking to pay on maturity of
the bill of exchange. The exporter’s bank receives the payment through importer’s bank and is
credited to exporter’s account.

f. Processing of GR Form: - On receiving the export proceeds, the exporter’s bank intimates the same
to the RBI by recordingthe fact on the duplicate copy of GR. The RBI verifies the details in duplicate
copy of GR with, the, original copy of GR receivedfrom the Customs. If the details are found to be I in
order then the export transaction is treated to be completed.

g. Realisation of Export Incentives: - If the exporter is eligible for export incentives, then he should
submit claim for the same accompanied by the bank certificate to the appropriate authority.